Crypto Index Tracker: Crypto Markets Tick Higher

Crypto markets have trickled higher over the past week, with markets refusing to price a June FOMC hike despite a debt ceiling resolution and monstrous NFP outturn.

Attention turns away from the debt ceiling debacleas President Biden and House Speaker McCarthy reached a deal to suspend the debt ceiling until January 2025. The deal comes in exchange for a $81bn or 0.3% of GDP expenditure cut relative to the CBO FY2024 baseline and a $68bn increase relative to FY2023.

Now, eyes are set on the Treasury General Account (TGA). Dominique writes that while the US Treasury plans to increase the TGA by $500bn over the next four weeks, this number is likely to be revised lower, and will ultimately prove bullish for equities.

Finally, the May Non-Farm Payrolls suggest a hike is unlikely at the June FOMC meeting. The details showed a +339k gain in employment but with no increase in participation or nominal wage acceleration.

Performance of Our Indices

This week, all indices (except our Privacy Index) are in the green with our Smart Contract Index (+1.4% WoW) pipping ahead of our Bitcoin Index (+1.3% WoW).

Our Smart Contract Index remains most correlated to our Bitcoin Index (+86%). Our DeFi Index trails behind (+83%). Meanwhile, our Metaverse and Privacy Index are correlated the least (+71% and +70%, respectively; Chart 3).

Equity correlations rise with our Bitcoin Index now 52% correlated to the Nasdaq 100 and +41% correlated to the S&P 500 (Chart 4). Elsewhere, it’s correlation to 10Y yields (6%) has dissipated and turned negative with Brent Crude oil (-7%).

• Smart Contract Platform Index: Solana (SOL; +6.5% WoW) gained the most while Fantom (FTM; -6.1% WoW) extended losses.
• DeFi Index: PancakeSwap (CAKE; +7.8% WoW) reversed some of last week’s losses while 1inch struggled (1INCH; -6.0% WoW).
• Metaverse Index: Redfox-labs (FROX) led the winners higher while the Virtua Kolect (TVK) slipped lower (-13.5% WoW).
• Privacy Index: More losers than winners with secret (SCRT; -11.5% WoW) experiencing the worst week.
• Bitcoin Index: is up -1.3% WoW.

What Are in the Four Indices?

Here are the indices in more detail:

• Bitcoin: the OG of crypto markets deserves its own category and is in many ways the true benchmark for any other crypto market.

• Smart contract platforms: after bitcoin, the big innovation was to have blockchains that were more programmable. These could host smart contracts or decentralised applications and have allowed the emergence of the metaverse and defi. Ethereum (ETH) is the most popular version of a smart contract platform. As well as ethereum, we also include some key competitors. The constituents of this index are: Ethereum (ETH), Cardano (ADA), Avalanche (AVAX), Solana (SOL), Fantom (FTM), VeChain (VET), Terra (LUNA), EOS (EOS), and Chainlink (LINK). We also include Polkadot (DOT) which allows interoperability between blockchains and the use of smart contracts via parachains.

• Metaverse: coins associated with the creation of a virtual space/digital world on the internet using a combination of augmented reality, virtual reality, and social networks. The constituents of this index are Axie Infinity (AXS), The Sandbox (SAND), Decentraland (MANA), Enjin Coin (ENJ), Aavegotchi (GHST), Terra Virtua Kolect (TVK), Ultra (UOS), Phantasma (SOUL), RedFOX Labs (RFOX), and Gala (GALA).

• Decentralised Finance (DeFi): financial services built on top of blockchain networks with no central intermediaries. This can be a broad category, so we narrow this down to platforms that focus on lending/borrowing, yield farming, automated market making and decentralised exchange tokens. The constituents of this index are: Aave (AAVE), Compound (COMP), Uniswap (UNI), Yearn.finance (YFI), Loopring (LRC), PancakeSwap (CAKE), Maker (MKR), 1inch (1INCH), Thorchain (RUNE), and Terra (LUNA).

• Privacy Coins: coins that obscure transactions on the blockchain to maintain the anonymity of its users and their activity. The constituents of this index are Monero (XMR), Zcash (ZEC), Dash (DASH), Verge (XVG), Horizen (ZEN), Beam (BEAM), Secret (SCRT), Decred (DCR), Keep Network (KEEP), and Dusk Network (DUSK).

Dalvir Mandara is a Quantitative Researcher at Macro Hive. Dalvir has a BSc Mathematics and Computer Science and an MSc Mathematical Finance both from the University of Birmingham. His areas of interest are in the applications of machine learning, deep learning and alternative data for predictive modelling of financial markets.

Photo Credit: depositphotos.com

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